ELECTRIC CAR RIVALS REVVED UP TO CHALLENGE TESLA
After ruling the electric road for years, Tesla may be about to face serious competition.
Dozens of battery electric vehicles will go on sale in the next three years, all from manufacturers with the ability to overtake the Californian start-up’s production volumes.
The current crop of electric models — such as the Nissan Leaf or the BMW i3 — do not seriously rival Tesla’s offerings, mainly because their ranges are not comparable.
But Jaguar’s I-pace, on sale in EuropeAFP since April, and Audi’s battery-driven e-tron, unveiled in Tesla’s Californian heartland this week, mark the opening salvo from the industry’s incumbents.
The big question is whether this electric onslaught threatens Tesla, or helps it by tipping the car buying public towards battery vehicles that will expand the company’s potential market.
“Rather than crushing new entrants, we suspect incumbent car makers will help validate and expand the existing market for electric vehicles,” wrote Bernstein analysts this week, likening the electric car wave to the boom in digital cameras or flash drives, where an influx of products from established groups aided new players in growing their business.
“A key tenet of most bear cases for Tesla today is that the company will become increasingly challenged by new electric vehicle competition from incumbent auto manufacturers.”
The Bernstein analysts tallied every announced electric vehicle in the US until 2022, and were left unimpressed. “The results were stark,” they wrote. “There is no actual flood of competition coming.”
Despite the number of the models coming, the analysts argued that many do not pose a serious challenge to the Model 3, which it expects to account for more than two-thirds of Tesla’s sales by 2022.
While the Audi and Jaguar products line up against Tesla’s larger, more expensive, Model S and X models, many of the mass market offerings from companies such as VW will fail to appeal to the aspirational Tesla buyer targeted by the more affordable Model 3, they argued.
However, in an industry where sales are buoyed by a steady stream of new products coming to market, Tesla is approaching a fallow patch.
Although the company is still ramping up production of the Model 3, a car originally launched in 2016, the group will not begin selling its next major car, the Model Y, until 2020 or 2021, said Goldman Sachs, which lists close to 150 competitor models coming into the market by 2025. That may not matter for Tesla. The company’s head start over the industry, and the fact that it started from scratch rather than adapting existing models to run on batteries, has also given it a technology lead.
Although electric cars are orders of magnitude easier than internal combustion engine vehicles to develop and manufacture, with fewer moving parts and largely commoditized battery cells, there is still scope for serious differentiation between models.
Early indications are that the new wave of electric vehicles, each one feted as a “Tesla killer,” falls short.
“The e-tron underscores that catching up with Tesla is more difficult than expected by many,” wrote Patrick Hummel at UBS, who noted that the car has slower acceleration and a shorter range than Tesla’s Model X SUV, its direct competitor.
Though “well made,” the car “fails to set new benchmarks in the premium EV segment, even though we consider it better than the Mercedes EQC.”
This is partly because Tesla builds its cars on a platform designed for electric cars only, while many other manufacturers adapt existing combustion engine architecture for their battery cars.
Under the bonnet,
Tesla’s technology in its cars is also “years” ahead of those from other manufacturers, according to a team of analysts at UBS who tore apart several battery cars for a detailed comparison.
“Tesla has a significant technology advantage over others,” Mr. Hummel said.
The team analyzed a Model 3, a new Nissan Leaf and a BMW i3, as well as previously tearing down a Chevrolet Bolt to assess the core electric technology at the heart of each vehicle.
The report said the Model 3 featured “next-generation, military-grade tech that’s years ahead of peers.”
The battery pack “appears to be ahead of all current production electric vehicles”, while the company has made “technological strides” in developing the inverter in the electric motor, it added.
Many of these features would be hard for established players to adopt, largely because they are developed in-house by Tesla, while others lean on their suppliers for technology, the report said.
But while Tesla may retain the technology edge, having technically superior products is no guarantee of success, as the fall of Betamax against the inferior VHS videotape technology showed in the 1990s.
Instead, Tesla is competing against manufacturers who can produce cars
at scale and quality without breaking sweat — something the Californian group has historically struggled with.
VW, which makes 10 million cars a year globally, plans to sell 100,000 electric cars in 2020, rising to 1 million in 2025.
It will launch four electric cars by 2022 in its ID line, while the group, which includes Audi, Porsche, Skoda and Seat, will offer 50 pure electric models by 2025.
“The ID will be a game changer just like the Beetle and the Golf,” Michael Jost, chief strategist at the VW brand, said.
Tesla’s own ambitions to produce 1 million cars in 2020 are contingent on a new Chinese facility opening, and it significantly increasing output at its existing Fremont plant.
Although it has received more than 400,000 orders for the Model 3, it has yet to build a base version of the car worth $35,000.
UBS, after calculating the build costs of the Model 3 and its component parts, forecasts Tesla is unable to turn a profit on any car sold for less than $42,000, far above the advertised base price for Model 3s of $35,000.
The house retains a sell rating on Tesla, warning there may not be sufficient
demand for more expensive, higher-end versions of the Model 3 car to sustain profitable sales.
Bernstein, which was so critical about the efforts of Tesla’s competitors, still highlights weaknesses in the company.
“Rather than competition, we continue to believe that Tesla’s greatest threat is ultimately its own ability to execute on the Model 3.” —